McGuireWoods London debt finance partner Marc Naidoorecently wrote an article for Finance Derivative explaining the growing potential for mutually beneficial relationships between institutional investors and capital-hungry borrowers in emerging markets.
In the May 7, 2022, article, titled "Safe Money Into Emerging Markets: Funding the Gap,"Naidoo described the lending gap that has developed as emerging markets, especially in Africa, have turned away from resource-backed lending flowing in from China that offers nominally low interest rates but imposes aggressive collateral terms. Traditional sources of capital, meanwhile, remain expensive for borrowers.
Institutional investors can help fill the need for capital, Naidoo wrote, and in doing so, can diversify their portfolios and bolster their environmental, social and governance (ESG) impact.
"Institutional investors can take the middle ground between aggressive debt and cautious debt," Naidoo explained. "What has accelerated this trend is the ESG agenda that has come to the forefront both in collective consciousness and in finance. The next decade will determine how successful this trend can be, but there is ample opportunity for both emerging market participants and safe money to create a mutually beneficial, and most importantly, scalable relationship. It would seem that each party would have a paramount role is shaping the policy of the other."
Naidoo is a member of the five-person executive committee leading McGuireWoods' ESG task force.
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